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Crowdfunding: Online-offline nexus matters

Sri Lanka has a limited but inspiring history of crowdfunding. With such examples behind us, how are 21st century Lankans practising crowdfunding?

July 10, 2018

By Nalaka Gunawardene

7 min read

‘Crowdfunding’ is the practice of funding a project or venture by raising small amounts of money from a large number of people. Although the Internet has made it easier in recent years, crowdfunding as an idea has been around for much longer.

A remarkable and ultimately successful crowdfunding effort took place in Sri Lanka over 60 years ago, which shaped the career of W D Amaradeva (1927-2016), who went on to become a leading Lankan vocalist and composer.By the time he was 25, Amaradeva stood out in local music circles for his talent. D B Dhanapala, then editor of the leading Sinhala daily Lankadeepa, once heard him sing and realised the young man could benefit from specialised training in India. Since Amaradeva’s family could not afford it, the newspaper – together with the leading scholar Prof. Ediriweera Sarachchandra – launched an Amaradeva Scholarship Fund.

The scholarship fund appeal, widely publicised by Lankadeepa, drew contributions from the rich and the poor. Some people sent very modest donations, while a wealthy woman gave enough money to cover a full year’s tuition. With such support, Amaradeva went to the Bhatkhande Music College in Lucknow, India, in October 1953 for five years of studies in classical music. The rest was history.

Amaradeva never forgot this gesture of collective philanthropy. He used to say, “I would call myself truly a people’s artist. Because when I went to India to study music, it was with the money of many people that I could go, which made my education possible.”

Another early initiative of crowdfunding is the ‘one cent fund’ launched by P de S Kularatne, a dynamic young lawyer who took over as principal of Ananda College, a leading Buddhist boys school, in 1918. To support expansion, he embarked on a major fundraising drive, which saw the school’s teachers and students going all over Colombo and collecting donations from any and all willing contributors. Kularatne’s biography records how poor daily wage earners and even beggars donated to the effort. No amount was deemed too small.

ONLINE CROWDFUNDING
With such inspiring examples behind us, how are 21st century Lankans practising crowdfunding? As it turns out, slowly and still a bit hesitantly. Modern day crowdfunding has a history of just two decades. As Internet use began to spread in the 1990s, some creative artistes soon realised the potential of appealing – and receiving – donations online. The first noteworthy instance of online crowdfunding in the music industry was reported in 1997. That year, fans underwrote an entire US tour for the British rock band Marillion – they raised $60,000 in donations through a fan-based Internet campaign. That success inspired the first dedicated webbased crowdfunding platform called ArtistShare in 2000. Since then, dozens of such platforms have emerged. These are being used to raise public support for many entrepreneurial ventures, artistic and creative projects, medical expenses, travel or social enterprises.

Such online platforms are trying out various models that broadly fall into three categories. In rewards crowdfunding, entrepreneurs or project proponents pre-sell a product or service before launching it. Contributors become early recipients when it does come out. In equity crowdfunding, contributors receive shares of a new company, usually in its early stages, in exchange for the money given upfront. In the US and elsewhere, new laws have been adopted to regulate this practice. A third kind is charitable crowdfunding, where donors don’t receive any monetary benefits, but are acknowledged – for example, in the credits of a film so funded. Kickstarter.com is one of the more popular crowdfunding platforms. According to the online data service Statistica, Kickstarter had enabled the launch of nearly 400,000 projects from its founding in 2009 up to April 2018. During this time, a total of $3.61 billion had been pledged.

In this system, project creators must choose a deadline and a minimum funding goal. Donors anywhere in the world can pledge amounts of their choice – the funds will be collected from their credit cards only if the goal is fully met by the deadline. So far, a total of $3.18 billion has been raised through Kickstarter. The success rate for projects is 36%. With such potential, Kickstarter and other platforms have also attracted their share of controversies and allegations of dishonesty or fraud by some project proponents. There is only so much that platforms can do to verify claims and promises of those seeking funding. The old adage of ‘caveat emptor’ or buyer beware still applies…

Itself a non-profit, Give2Lanka was set up to fill the funding deficit that many local NGOs faced due to dwindling international donor agency support. Its focus is deserving causes in the areas of children, youth education and empowerment. Some charities have long been crowdfunding through conventional means of phone calls or mass mailers. SOS Children’s Villages and HelpAge Lanka are among those that engage in such fundraising, de Silva says. In fact, SOS has a target of becoming totally dependent on local fundraising by 2023, with no funds sent by its global head office.

One way technology can help charities to raise funds from the public is through partnerships with telecom companies. Recognised charities can arrange for people to donate seamlessly through mobile phones. It can be either cash or other means – such as ‘star points’ that users have accumulated in retail transactions.

Currently, around 20 charities in Sri Lanka use this option, but it can succeed only if the charity publicises this extensively in the media and/or social media, says de Silva.

Another approach is for the official website of the charity to get a payment gateway from a bank and ask people to donate online. Some NGOs, including Give2Lanka, use this process. But, as de Silva points out, “Many Sri Lankans are still shy of using credit cards for such payments. Here again, success depends on the specifics of the cause, and on wide promotion in mainstream and social media.”

Individuals and groups in Sri Lanka are increasingly using international crowdfunding platforms too. A search through justgiving. com, for example, showed appeals posted by locals and foreigners in aid of diverse causes in Sri Lanka. These include educating poor children, supporting those with disabilities and helping women entrepreneurs. When disasters strike, this kind of platform provides additional reach for relief appeals. Interestingly, a few researchers and explorers have also set up appeals – with varying levels of success. Overall, these methods are still (relatively) new and only a few Lankan charities and NGOs are using them well, according to de Silva.

ONLINE-OFFLINE NEXUS
One key lesson learnt by those who have used online crowdfunding methods is the need for offline promotion – lots of it.

Award-winning Lankan filmmaker Asoka Handagama tried the crowdfunding option in 2014. He posted a funding appeal on Crimso, a New York-based, open, global crowdfunding platform for art, business and community projects.

His aim was to raise at least $50,000 for his feature film ‘Let Her Cry’ (Sinhala: wef.a wei w.), released in 2016. But he only managed to raise around $6,000 from this method, which represented only 5% of the total budget of $120,000. He used this money to finance a part of the post-production work. Asoka’s advice for other Lankan artistes who want to use crowdfunding: “It is not advisable to seek crowdfunding for a product like a movie. You may be able to raise funds for a low-budget, documentary-type work, but not for a feature film. I think there will be more crowd attraction for an artistic project that is community-based. For that also, one will have to do a lot of publicity outside the crowdfunding platform. Such platforms only provide us a mechanism to collect the funds.”

Despite these challenges, crowdfunding – online and offline – is set to grow, and early adopters stand to reap dividends. In the long term, however, our society’s attitudes on philanthropy will shape how well crowdfunding can work in Sri Lanka. Enabling laws and regulations can nudge us in the right direction.